Bega Cheese Limited (BGA) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Bega Group 2024 Results Conference. [Operator Instructions]. I would now like to hand the conference over to Mr. Barry Irvin, Executive Chairman. Please go ahead.

Thank you, and welcome, everyone. I'm delighted to present this year's annual results, particularly in the context of what's been a challenging 3 years where we've had many external factors, beginning with COVID, then beginning with significant cost increases followed by in the year that we're currently in a major shift in global commodity markets that have certainly challenged the business. But I think what is pleasing is that we have been able to continue to execute on the strategy. We've been able to strengthen our balance sheet, and as we look forward, we see great opportunity for this business as we execute over the next 4 to 5 years in terms of that transition to a branded business.  If I was to go to the presentation, I will just go to Slide 3, which is titled Overview. And I will give you a brief overview, and then hand to initially CEO, Pete Findlay, and then CFO, Gunther Burghardt. So, in overview, and I guess I touched on it, the really strong performance this year has come from our branded business. And it is living up to all that we might have expected of it. Indeed, the results demonstrate the strength and the breadth of the portfolio. We do have market-leading brands, and we are investing in those key growth strategy categories. So very, very pleased with how they performed. And that's on the back of an execution of strong innovation and in-market activity that's driven value growth.  Perhaps pleasingly, in uncertain times and in difficult times. We've got strong results also in the international brands and food service business, where we've always seen a great opportunity, but that opportunity is beginning to be realized, and we see great growth for that particular part of our branded business into the future. Importantly, we have had to transform parts of our business to respond to the changing marketplace, and indeed, the changing circumstances of the industry, particularly from a capacity point of view and a milk-supply point of view.  So, we've had a major organizational realignment, which people talk more to, but it's done 2 things. It's made our branded business far more effective and efficient, and it's made our bulk business more agile. And I think those 2 things is what positions the company well for the future. We're, of course, always looking for opportunities, and we're always looking to improve efficiency and productivity. We've had some small corporate transactions in the acquisition of the Betta Milk business in Tasmania and then that the rationalization of that business into our Lenah Valley plant.  We've announced only in the last few days, the agreement to sell our orange processing facility, which is a facility that basically squeezes the bulk juice. We are absolutely maintaining and committed to our orange juice branded business, but we've actually done a transaction there where we see a specialist orange grower by that facility and enter into a long-term agreement with us in terms of how we might service our orange juice business. And we, of course, have previously announced a strategic review of the Peanut Company of Australia that's still underway as we look to more simplify our business and make sure that we are driving productivity and efficiency.  The financial performance for this year, we would openly say that we still think that there's much more to be achieved financially in the business, but very pleasing in somewhat uncertain times to report revenue growth of 4%, but maybe you're even more pleasing on that branded strategy brand growth of 6%. The strong branded EBITDA growth has offset the challenges that we've often talked about around milk prices in the FY '24 year being disconnected to global commodity prices. We'll speak a little bit more about that later. I think importantly, really strong cash generation, delivering a year-end leverage ratio of 1.3x. Moving to the next slide, which is the financial highlights, which, of course, I will leave Pete and Gunther to refer to in more detail. But as I said, very pleasing that we've been able to improve performance across the board, improved revenue growth, EBITDA performance, profit after tax, EPS, all of them improved. Importantly for shareholders, we've announced a final dividend of $0.04 per share, giving us a full-year dividend of $0.08 per share, which is up on last year by 7%. I mentioned it earlier. I think for me, it's always important that the business is able to execute on opportunities either internally or externally and a net debt of $162.4 million, reflecting that strong cash generation, very pleased in giving us that leverage ratio of 1.3. If I move to the next slide, it's really just to make sure that we continue to reinforce what our ambitions are and what our vision is. It sounds like a bold statement, but I do believe that we are well on the path of becoming not only a business that owns some of Australia's most iconic brands, but the business itself is becoming the great Australian food company as we look to continue to build and refine our business. So, we are very clear on what we want to achieve and how we intend to achieve it, which I think is reflected in our vision, purpose, and value statements. I won't dwell too long on Slide 6, which is titled our transformation, but it does talk about how this -- the company celebrated its 125th birthday this year. And indeed, it's been a particularly busy time, I would argue in the last 10 to 15 years of that long history. And I think we have indeed moved from a small cooperative on the lower South Coast of New South Wales producing a singular bulk product and selling it really just in one state to now executing the strategy that saw us first expand growth scale and create adjacencies in the skills that we had and then make the major decision to start to move into brands with first the acquisition of, of course, Australia's master conic brand Vegemite, and then add to that a series of dairy brands that we are presenting to you today in terms of that. That I think significantly strengthens the business. And I might say that the presentation of the business today as compared to what it would have been even a decade ago, I think that business a decade ago would have found it very hard to operate in the circumstances that we find ourselves in today and in the last few years, whereas this business with its brand strength can look forward with great optimism.  Just to touch on sustainability. We've got some significant coverage in recent times, and I would encourage anybody that was interested to understand more about the circular initiatives that we've launched in the Bega Valley to have a look at the landline program that was on a few weeks ago. But certainly, we've refreshed our sustainability strategy. We've always built on the great food for better future themes that actually reflect if you like, both the history and where we want to be in terms of a sustainable business for another 125 years. But we very much embraced circularity, community, and importantly, collaboration in our strategy going forward. And that does include the fact that the Bega Group is one of the strong engines behind the regional circularity cooperatives and indeed the construction of the National Center for Circularity in Bega.  This initiative, I think more than any other that I'm aware of, demonstrates the importance of collaboration. The range of partners in the cooperative driving research and implementation of outcomes that will make a sustainable difference not only within the Bega business but well beyond it. And indeed, I think we'll look to demonstrate both in Australia and around the world, the right approach to sustainability and getting effective outcomes both from an economic point of view, an environmental point of view, and a social point of view. So, we're very excited about this project and very pleased with how it's been embraced by many of our partners and deep research into government and beyond.  That is the briefest of overview from me. I think, obviously, it's very appropriate that I hand this presentation over to the CEO, Pete Findlay, who has been executing our refreshed strategy over the last 2 years, and I think it's demonstrable for all to see that we're having great success in positioning the business for the future. So, Pete, I'll hand it to you.

Terrific, Barry. Thank you very much, and thank you to everyone for joining the call, in particular, our shareholders who have given us wonderful support over the last 12 months. If we just go to the next slide, which talks about strategic priorities. And I think it's worth just quickly discussing the strategic plan that we outlined about 18 months ago. And it's really driven our focus for the FY '24 period. And we've been working very hard to execute against that strategy. So, we had 6 pillars. One was around protecting and growing our core business in the large grocery trade in Australia, which is particularly important to us. We hold high market share in those places, and that has been a significant profit engine for us, and we will note the importance of continuing to work with our large partners for the event for us moving forward. The second, remember the strategy was to win on the street where traditionally, we have been a little bit underrepresented. And that was outside of noncore grocery winning in areas like food service and local trade and institutional business, hotels and restaurants and cafes, et cetera. And then the third limit of our strategy is to try and streamline our sites. We've always got a focus to try and improve productivity and efficiency to remain both domestically and globally competitive given that we want to play in those areas in the future. The fourth look of our strategy was around sustainability, meeting both our community and consumer goals and ensuring that we're in step with the requirements that we have to meet moving forward. The next part of our strategy was securing solids, and that was really around building a more resilient bulk business that could compete the solids in a time of high demand and continue to create good streams for those solids, both in international and domestic markets and also support the growth of our branded business here in Australia and overseas. And then the sixth pillar was around our international opportunities, particularly in the branded space. The business has always had a good footprint or presence in the Middle East, Southeast Asia, and Northern Asia. We just felt that there were opportunities to continue to expand in that space and really drive that forward over the next 5 years. And then that was also underpinned by organizational enablement. So, getting out our organization set up to deliver on that strategy and ensuring that it was able to operate cost-efficiently.  And so, I'm pleased to say that we've made good progress against that strategy during FY '24. Our core domestic grocery business has done well. We've had both volume and value growth by working closely with our key partners, being Coles, Woolworth, Metcash, and Costco, and we're extremely pleased that in an environment where there were significant shifts in and out of particular channels and retailer-owned brands, we were still able to work with those partners and drive volume and value growth.  The second piece was around our chilled distribution network. We did see quite a few headwinds around out-of-home dining, which did impact our restaurant train and our petrol and convenience train. But we're still able to execute well in areas like food service, we're able to actually take market share. We've got 14% growth in food service, and that certainly helped mitigate some of those channels, but we're particularly pleased about the progress we made there. Also in our customer experience, how we dealt with customers, and how we have that cost to serve where we've continued to make base. And our international markets, we actually had a record year in our branded international business. We delivered just over $250 million of revenue, which is up 1% significant growth in Southeast Asia and Northern Asia, in particular, around our yogurt and cream cheese business, which is high margin and very lucrative too. So, a really good year in our international markets.  Whilst we got growth on the top line, there was still a really strong focus around enhancing capability and driving efficiency and cost-effectiveness into our business. So, we've done a lot of work around streamlining upsides. As Barry talked about before. We obviously completed the move out of our Canvas site by selling that business, releasing cash back into our results. Goodness team got a terrific result there with the sale of that business. And we're able to shift that volume dependent.  So, also creating good cost efficiencies in our like milk numbers out of pine due to that. We obviously bought the better milk business in January of this year. I'm pleased to say that within 4 months, we've actually transitioned out of 2 sites that were previously owned by that business in Berne, in Northern Tasmania, and the Mandeville Cream site, and we're able to put that volume into our Lenah site and also by settled gains on our manufacturing capability in test, which was great. And then obviously, the transaction we've just done with the orange juice site where we sold that to Grove, we are able to nearly double the volume through that site and share those efficiencies with us.  So, whilst we still remain incredibly committed to our juice business, bottling and branding juice, we're now able to get an uplift in our production costs for that business, and obviously, we're looking at the 2 PCA sets and how we get a better cost structure there for our business. So, a lot of work done there. We also completed our restructure of our head office. We closed nearly 250 roles in the head office, generating close to $2 million of annualized savings, and took additional roles and some of that factories, probably another 50 out of our factories, which is also helped a lot of work happening there, met our sustainability commitments, which I'll talk to in a little while and have now got an organization that we think is set up, particularly across the branded space to focus on those 2 core, both grocery and nongrocery and the international piece stemming off that. So, we're pleased with that.  We did get growth in our business. And I think that, that will be particularly important to have growth and momentum going into an environment where it is difficult for growth, I think, over the next 12 months, but also continue to work on our cost basis. And we look to do that by driving very targeted promotional campaigns on that train of activity in direct.  If I move to the next page, which is just one of the highlights. I won't spend too long on this slide, but just to reiterate some of the comments that Barry made, maybe extrapolate on them a little bit. We effectively had a $50 million-plus earnings hole this year created by that disconnect between farm gate milk price and our commodity prices. And I was just really pleased to see the branded business be able to cover for that hole and actually give us year-on-year earnings. And that was done through good top-line growth, rate resilience from our brands, but also a lot of value creation that I talked about before. So really demonstrated the resilience of the business. And I think now as we things start to normalize in the bulk business, we can continue to see an uplift in FY '25 earnings. That really takes us towards that FY '28 target of $250 million of normalized EBITDA.  Also really pleased around our balance sheet position off the back of that. And the team has done a huge amount of work under the guidance of Gunther around reducing inventory, really focusing our capital spend. So, our capital spend sitting below depreciation. I don't think that that's a bad thing for our long-term broad from the team on areas where we think we can make a difference. And that's actually allowed us to continue to increase our return on funds employed and our asset terms on the business and gives us flexibility by reducing our net leverage ratio. When I joined the business back to the end of 2019, our leverage ratio was sitting over 3x. And the fact that now with the new earnings outlook, I think, is something that we can be really pleased with.  If we just move on to the next slide, which is titled branded business momentum. And as I said, generating a significant uplift in our branded earnings for the year, and that was done through good growth on the top line created by volume and billing growth to help mitigate significant costs that come to our business, but also a lot of really heavy work done around efficiencies and productivity and driving costs. We've always realized that it's not a long-term strategy just to pass on cost increases on the consumer. And in fact, as the consumer begins to tire, but those cost increases, particularly to FY '25. Cost improvement productivity will be absolutely key moving forward.  So, we did a lot of work around retendering logistics services. We bought a lot of logistics back in-house and used excess, which is connectivity in the economy to drive benefits there. We've reviewed our fixed costs at all of our sites, and we're actually able to spread our services across a number of sites, also with the reduction of those sites I talked about that will also play patios footprint that it takes to support us. Site costs there. We changed shift structures, there was a real focus on driving operational output out of our particular lines, which allowed us to change our shift structures down. So, actually producing more with less, which enables a number of costs to come out of some of our larger factories.  And we target our promotional spend where we had operational leverage. So, driving volume in lines and factories, in particular, and that was very -- we worked really hard with our large customers to do that in a targeted way. So, a really good brand of business and momentum. As I said, our food service business grew dramatically, 14% revenue increase, and we think we can maintain that. We did a lot of work around setting up a proper brand food service portfolio. We specifically for the food service business and to meet those customers' needs, we did a lot of work around ship selling, and we hired some tweeting into that business to drive that. And we certainly think we can continue to win on the street in the future. And that will probably drive a lot of the uplift in our branded business moving forward. And I always spoke about the success of our branded business overseas, where we would like to double the next 4 years as part of our -- so really good momentum in our branded business.  We just moved on to the next slide around innovation, which was core to that momentum. Our yoghurt category is highly responsive to new product development. And the team has a huge amount of time making sure we've got an innovation pipeline for yoghurt, for milk-based beverages where a lot of our high margin and operational leverage in our business. We've got great sites to support that growth in inflation. So, there was some terrific work done around new pouch format. We did work on our funded children's offering and our go-play no-sugar offerings. And that has led to us increasing our pouch output specifically. And so, you know that we produced or put in place a new pouch line about 18 months ago. And in actual fact, that pouch line is new capacity we'll do more than 10,000 tonnes, 2 years ago, we're doing about 5,000 tonnes. So, a really good uplift in that pouch capacity, and that's meeting our consumer needs.  Also, really good innovation across our workplace beverage category and pleased to say that we've maintained our strong leadership in that area with more than 50% share lactose free and no sugar added offerings were limited, or no sugar offering has now moved to about 8.5% of that total milk-based beverage offering and we actually grew by about 23% year-on-year. So, linking into functional trends and continue to make that milk-based beverage offering very relevant. We obviously did out the plant-based offering, and we introduced our intense range, which is actually one of our -- so very, very important that we continue to invest in milk-based beverages. And I'm really pleased to say we've got some terrific innovation over the next -- in formats and new functional benefits in that space that we can continue to drive the growth of that moving forward.  The next page, which is core brand growth. If we go to that, a significant investment back in our brands in the last 12 months. So, ongoing investment in Vegemite. We celebrated our 100-year anniversary, which is terrific. We put some money behind Farms Union, and we did see also all all-around advertising campaign, which is particularly successful. And sorry, I'm just moving a little bit closer to the mic there, which was particularly successful and drove 11% uplift in that space. And of course, we ran a Yoplait campaign as well, which helped drive growth into the Yoplait brand. We did a lot of messaging around some of the innovations around Yoplait with no sugar added and lactose-free. And Yoplait really resonated with consumers who are seeking value, particularly in the second half of the financial year.  There continued to be strong. We had a no sure range, obviously, which I said, we implemented particularly well against when we ran a dead urgency and R U OK in-store brand activity around there and really pleased to announce we've got some significant new material coming out of support there, both on TV and outdoor billboard over the next 6 months, which we're excited about. And we ran a West Australian Cowfish advertising campaign, which was just tipping our toes into how we support some of our local brands. We've got some terrific local brands. And yes, we've got some really good uplift there. And so, watch out some news around what we do around dairy farmers in some of our other states, which was really exciting. We'll just move on to the next slide. And I thought this is worth talking about our international market expansion because we do see this playing a significant role for us in the future. Bega has always had a really good international branded business. It intended to grow out of a push strategy where we saw opportunities for products produced here in Australia under an Australian halo to be sold into the international markets. That served us really well for a period of time. But we think that taking to the next level, we need to focus a little bit more on a demand-led strategy. So, specializing products for those particular markets that meet consumer and customer needs. In particular, focusing on the food service area out of home heating is a particularly big trend in places like Southeast Asia and the Middle East, and Northern Asia. So, developing products that meet those food service needs, working with ships, and promoting those products in the right areas.  So, we've done a bit of work around that. We have consolidated our distributors in those marketplaces. We've created relationships with those distributors that we think can best meet, and so we've also created direct relationships with retailers and food chains entirely and we started a really good relationship with Siam Foods, who owns a lot of convenience that works in that part of the world. And we're working with them directly on cheese slices to their sandwiches and so forth, which is just starting to create significant opportunities. We've also done some extensive branded work. So now across all those countries, we've got a consistent green Bega branding, which is really helping us stand out on shelves and exhibitions and so forth. And we're building out our capability. So, the international team will hit 26 people. This year, we're just setting up a marketing team that will be based in the country, and we're looking to set up relationships with manufacturers in the country that gives us other optionality around second processing in our product. Very excited about our international branded business. As I said, very strong growth in cream, cheese and yogurt and processed cheese. We will probably focus on those 3 categories. We don't want to try and be too much to too many markets. And we're particularly excited about what FY '25 has in store for this part, and we're already seeing good results in the first quarter. If we move on to the next page, which is about our brand momentum, and it's something that we tend to talk about at these results and sort of goes to what Barry was talking about, our branded business is now 86% of our business, significant growth. And we were really pleased that we actually improved our branded segment EBITDA margin, which was at 6.6% for the period. Still nowhere here where it wants to be, and we have aspirations and moving that we're heading in the right direction, and we're pleased with some of the work we've done over the last 18 months is developing that margin. We'll work on that margin through areas of growth, product mix and just continuing to drive cost out efficiencies. We move on to the next slide. This is a slide around our brand shares. I guess we just come back to this slide because it highlights the strength of our brand share across core retail categories, but also has been so good growth in those categories. We continue to focus on areas where we're #1 around milk-based beverages and spreads and yogurt, obviously high margin categories for us and areas we will continue to work with our consumers and customers to drive growth and innovation. Good performance out of our millk business and juice business and an even more loss where we have strong share and that gives us a platform to continue to grow on and drop to our manufacturing side. If we move on to the next page. We continue to look at consumer trends. The good news is that the sort of the 4 key trends that we sort of focus on and that we evolved our strategy on still remain in place and still remain very relevant to our categories and our product rate. Better value has probably been heightened over the last 6 months and I think we'll continue to stay heightened throughout FY '25. We've got good brands that can appeal to customers in this time of space, and we've got good pack sizes. Also, we see some customer segments still want to be lean, we have seen a little bit of a swing back to those one kilo offerings and offerings of brands that proposed the consumer. As I said, we think we play pretty well in that space. We also have a terrific relationship with our customers who do retail brand. We continue to work with them on how we can meet their needs. We saw particularly strong growth in Aldi and Costco, and it'd be fair to say we're working with Coles Board all the time over retail or own brands. In fact, you have some pretty good growth in the independents where we supply a lot of their retail as well. As we've seen consumers probably down trade a little bit of out-of-home meeting into large grocery chains and then within large grocery chains down to retail own brand, I think we've been pretty agile and pretty good in meeting those needs and moving with those consumer trends. Functional health is still really important. I rolled off some of the numbers around no added sugar and around lactose-free, we continue to see opportunities around high-protein, social benefits such as calcium and probiotics and in fact, you see a lot of that reflected in 12 months. We continue to try and build products that move our demographic changes. We are seeing shopping continue to be more frequent. We are seeing people still wanting or they can consume on a go and that they're happy to give to their children, which is why we had such strong growth in pouch. Also, that Farmers Union program around the brand appealing to new demographics and new micro groups who continue to use that in their cooking, particularly Middle East and Asian cooking. That continues to be a focus for us. Sustainability. Whilst sustainability has a high awareness, yes, we need to continue to meet those awareness needs but do it in a way that's commercially savvy because we would say that we're unable to necessarily get consumers to pay more for those sustainability benefits so it's important balance. If we just move on to the next page, which should be our brand business. Look, a really challenging year for our Bubs business from a financial perspective, really caused by that disconnect between farm gate milk price and commodity prices, and I'll show that in a couple of slides moving on, but I was really pleased with the way we give work in that environment to improve the resilience of our commodity business forward. The team put a huge amount of effort into taking cost out of that business and making it more flexible. We took out several million dollars of overheads. We looked at how we might create higher-value markets, particularly around our proteins, so we opened up new markets with protein-concentrate in particular, and how we dry and process some of our way concentrates and market for that product in places such as China. How we really continue to double down and reinvest in our cream cheese business, which is working well in the branded space overseas and how we might look to actually increase capacity. A huge amount of work done within the commodity or Bubs business to make that more resilient and it would be fair to say that, that allowed us to compete for the mills we needed in the year '25 procurement season. It also still gives us the capacity to pick up opportunity milk but as that arises during spring flush. I think sets the business up for a stronger result in '24. We're actually really pleased with the way we're able to shape up and compete for milk in June as we went through that procurement season. A huge amount of work done, we actually think that the Bubs business will return to profitability this year. It still won't go back to the historical levels that we would have liked, but we think it's in a much better place than what it was. Hopefully, as we continue to build out some of those improvements after those FY 2022. One other thing I must highlight that this work during the year on being able to move in out of different streams, so we were able to pick up some benefits from higher fat prices and alleviate some of those lower protein prices around skin milk powder and demand for infant formula, which was great. We've also just installed new capability at our Tatura site that is actually helping produce non-dairy proteins, and we've signed an agreement with a local provider for an offtake over the next 3 years. We're hoping will end up being quite a lot pretty stream for us. It is actually not attached to commodity dairy prices, which is true. If we just move on to the next slide. I think it's worth looking at Australian milk production. It was actually a really positive year for milk production off the back of some, we haven't got the FY '24 farmer profitability numbers, but we certainly got the FY '23 numbers, which was terrific that farmers were able to have a really profitable year in FY '23. We think that will actually be reflected in FY '24 and we actually saw some uplift to mill production, which was fantastic. Some growth there up to 8.4 billion litres. With that, we've probably seen a little bit of contraction in capacity as people have pulled capacity back, which has probably helped that dairy connect a little bit better with our international commodities. It's pretty early to tell what milk production might do over FY '25 year through July and August. We're hoping that milk production stays relatively or maybe increases a little bit in the FY '25, which would actually be the first time in that 2 years of mill production growth since 2014, so that would be promising. Certainly, a stabilization. We move on to the next slide, which we've talked about in our half year results with actually shows the Australian milk price, our published price shows it against a basket of commodity milk products and the value of those milk products. You'll see there the significant gap that we had to cope with during FY '23, but more importantly, the reduction of that gap in FY '25. What becomes important is that it's not so much the milk price itself. In fact, we would love to pay a higher price to the milk, but it's actually that relativity to that. That's come back in line, which is what will help us drive a profit back into our Bubs business, this you'll notice though that the commodity prices still haven't improved dramatically and we would have hoped that they would have lifted a little bit by now. They haven't they stayed relatively flat. Unfortunately, we don't see that improving certainly in the first half of FY '25 and probably up for the first 3 quarters of the financial year. We're seeing probably low demand still in China and while supplies come back or production come back to North America. We're just not seeing that demand line reciprocate and rebound. We think that commodity prices will unfortunately stay pretty flat throughout. So, if we just move on to the next page, where we look at our manufacturing facility, and we've talked about this. Obviously, we've now closed the Camber site. We bought and closed the 2 sites in Tasmania. We've now sold the Leeton facility, and we're reviewing those 2 sites at Kingaroy and Tolga. And so, that's really about just continuing to try and optimize our footprint and get a better cost per unit out of our business. It also allows us to run it overhead. So, that's something we'll continue to focus on. We'll also look at where we want to shift production volumes to get that best operational leverage throughout the business as we look to try and drive volume and drive cost per unit. If we just move on to the next slide, which is around investing in line with strategy. We did actually do some fairly significant projects in FY '24. We obviously reduced that overhead footprint, which will drive $22 million of annualized savings, $12 million, which were FY '24 year. And we think actually aligns our sales organization better to our channels and actually allow us to invest in that sales organization. We maintained our CapEx, but I think there's some really important projects that will drive benefit into the future. So, we did finish our new digital sales platform, which is part of that win on the street strategy. That we hope will enable growth by making us a lot easier to trade with, but will also drive cost benefit back into our cost to serve and distribution model. So, we've been able to roll out good disciplines around minimum water values, reduced drop -- increased drop sizes, reduced drops to our customers. So, we're able to engage with customers in a better way, but actually will service at a cost. So that's something that we're really excited about, and we're doing a lot of work on our cost to serve this year. We've got a number of projects in place that we're working through at the moment. We did some heavy lifting on integrating our core ERP systems. We will not be going to a single core ERP rollout. We just think that, that's not the best way to spend our funds at the moment. But instead, we're putting some pretty smart middleware layers across the top of it that allows us to bring together our integrated business planning processes, drive a much better demand picture across the business and gain from our customers in a better way and also take costs out now. So, we think that, that's a much more effective way by putting lines of middleware in a that actually bring out the ERP systems together at points that make a difference rather than trying to drive integration across. So, that was really successful and we'll continue to roll out incremental changes in that and got to sort of helping lead those. And of course, 11 in warehouse automation. That's a $30 million project. We've kicked that off. That won't be in place until FY '26. And we're hoping that, that generates and really future-proof at with all of our yogurt and a lot of the MBB goes through. So, we think that that's well our strategy. So, some good CapEx being spent. We anticipate that CapEx will stay below that $85 million depreciation number, somewhere around that sort of $70 million to $75 million large. It will be focused very much on the things that drive those strategic pillars that I talked about at the top of the present. Just moving to the next slide. I just thought we just expand a little bit on our large sustainability initiatives. We do have our commitments around our 40% reduction of absolute emissions by Scope 1 and 2 emissions by 2030. We've obviously formed a Risk and Sustainability Committee, and we do monitor those on a regular basis. Really pleased to say that we're tracking well with that, and the team is doing a really good job on putting that in place, and putting it in place in a way that also drives cost benefit through that business, which I think is really important. 30% reduction in water is by 2030 is also on target and our next era by 2050, obviously, bugging our 2030 targets here. We see a good 40, 40, 20 diversity numbers for commitments are also traveling well. I'm really excited about the Bega circularity project. We're obviously a member of that co-op. But one round of the impact that has on our brand, and it's in the home of the company, which is really important, but also too excited about the learnings we can take from that and spread across our other communities that we're obviously key players in and bring benefits to other communities and our suppliers and customers. The packaging continues to be a key part of that. We're obviously -- have made significant ATCO packaging commitments, and we continue to do well against those targets, and we'll continue to invest behind that. So, rolling out a lot of initiatives, particularly around our smaller packaging formats in milks beverages. We've got some great nutritional awards. And as I said, we're continuing to launch products that are better for you that meet our consumer needs, but also, I think, have a black impact for food industry. And we're doing work around how we meet those reporting requirements that are coming at us very quickly around climate change and the impact that has on that business. And I think we're in good state to do move those changes and meet those legal requirements in responsible way and a way that allows us to guide our business in the future as well as communicate with our shareholders. So, with that, thank you very much. And now I'll hand over the call to Burghardt.

Great. Thank you very much, Pete, and I'm going to do in the half a dozen slides a whistle stop tour of our financial results. The next slide titled profit and loss. And throughout these, I'm going to focus on our normalized results. So, on the left side here, Barry has already talked compete about the source of our revenue growth. I have a later slide where I'm really going to unpack how our EBITDA, our profitability has moved from FY '23 to '24, so I won't talk to that here. I did want to touch on 3 or 4 accounts. So as Pete said, our depreciation and amortization down to $88 million this year and consistently, you'll see us invest in that $70 million, $75 million CapEx level. And not starving CapEx at all. We're investing in growth. We're investing in capacity. We're investing in savings and efficiency. Where we've chosen to invest a little less in the last year is our bulk sites. So, very choiceful in our bulk sites are very choiceful in some of our fresh white milk sites during the year, but not starting our CapEx program and investing where it matters. You will see us investing 15% to 25% a year in IT over the next 3 to 4 years as well. So, that's important. You do see a net step-up in the finance cost line. So, it goes from $23 million in F '23, up to nearly $35 million. Now, $5 million of that is interest rates themselves being higher for that 12-month period. The other $7 million is the impact of the Vegemite Way lease. We have the first full year of the sale of leaseback Vegemite Way, and we also renewed the leveraging lease during the year. So, $7 million is the combined total of lease impacts. Our normalized tax number is very close at rounds right up to 30%, so nothing to say there. And that's what translates into 9.96 a share of EPS. What I'm excited about is the potential for our EPS to expand over the coming years. Pete is going to come and talk to you in a few slides about our guidance for next year. But even if we delivered on market consensus in FY '25, which is about $195 million. If you your depreciation and amortization stay under $90 million and declines a little bit, you've got EBIT of over $105 million, right? We think that the $35 million net finance cost is the peak, and they begin to slowly decline as we manage cash more efficiently as we have a more robust balance sheet as rates begin to decline. So, let's say it even stays above $30 million next year, but it declines. Well, you're talking a profit before tax of over $75 million. After tax, this is $50 million of profit after tax. So already, you're up over $0.16 a share, which would be 60% growth against this year's EPS. The point I want to leave you with here is the potential for Bega's earnings per share to expand over the time horizon of our strategic plan. That's very exciting. On the next slide, I've got a reconciliation between our statutory results on the left side and our normalized profit on the right side. And I'm just going to talk to the EBITDA role itself. Our statutory EBITDA was $165 million. And from that, we've deducted $13 million. That was a non-trading material item, which was the sale of the Camber site that Barry talked to and peak. So, we removed that from normalized earnings. We did have $5.3 million of additional restructuring. And as Pete said, this restructuring was really targeted at our manufacturing sites or logistics network. And what you're going to see in the next slide is that this is one of many things that led to over $40 million of efficiency programs across our supply networks. This was an enabler for that. You see the better milk acquisition that we completed in December 2023. We have $6.9 million of onetime costs as we consolidated production into Lenah Valley and Tasmania, and we also wrote off $2.8 million of assets as part of that. So, that is how you get from $165 million of statutory earnings to $164 million of normalized earnings. Now the next slide is probably the one that's most interesting in understanding our profit evolution during the year. It's called profitability overview. On the left side, you get $160 million, which was our normalized EBITDA from F '23 the prior year. And on the right side is $164 million, which is what we delivered in the most recent year. And in between, you see the key things that moved our P&L. So, the first 3 blue columns, they are all above the branded business. And if you add them together, they add up to $71 million EBITDA improvement in the branded business. That's over 50%. So, the first bar is about branded volume, mix and price. So, as Pete and Barry mentioned, it wasn't just about growing volume. It's actually about growing in the categories that matter. So, for us, yogurt milk-based beverage, spread, those categories have substantially higher profit than some of the other categories we competed. And I'm very pleased to see we grew volume and value in those categories. And we put a lot of our investments, a lot of our innovation into those super categories, and it really shows in this result. So, that drives category mix. We did take price to partly mitigate inflation in F '23. And if you remember in the prior year, there's a lead time to pricing. So, there's 2 or 3 months with some of our big customers. The great news is as we go into F '24, we had the annualized benefit of that price. And we took some more price to try and get close to cost inflation. I didn't quite get there, but took some pricing, right? So, that's all bundled into that $12 million. In the middle column, you see $84 million of cost inflation. So, inflation has decelerated, but it's not negative. That's about a 3.5% cost inflation across our cost base. Labor is going up almost 4% in our factories. Energy and gas continued to increase and some purchased areas like coffee and cocoa continue to escalate. So about 3.5% inflation. But what we're really proud of is the next bar, we offset more than half of that entire cost of conflation with efficiency programs. So, $43 million of efficiency and value creation programs, that's more efficient lines in our sites, restructuring over time, restructuring shifts in the logistics network, it's consolidating cool rooms and making them more efficient. And a huge chunk of that is procurement savings from our procurement team. So, all 3 of those functions working together. And then, of course, overhead savings, as Pete talked about as well, we're a big factor in the branded business. And a lot of the overhead savings we have are within that branded business. So over 50% growth. As Pete said, a tough year in the bulk business. So, year-over-year, we dropped $61 million in earnings in our bulk business. What I'm really proud of is if you looked at commodities themselves, it would have been an $80 million decrease. But our Vault team went out in spring on. They found lower-cost opportunity milk that was available during the spring peak that may profit on that. They changed ship structures in some of the bulk sites. They became more efficient, and they mitigated almost $20 million of that impact to get us to a line of 60. So, great work by our bulk teams. The final bar there is a $9.7 million increase in unallocated overheads. And you may ask with your restructuring, why is that number going up and not down. Right? So, first of all, as I said, the biggest part of our restructuring savings was in the branded business. And as we changed our entire organization, we created some sectors of excellence in the center. So, for example, finance is embedded in a number of business units, but we now pull that past and show it as one shared service center. IT, likewise, we'll bring that into the center. So, there was a $5 million trends for overhead cost as we restructure our organization into that unallocated overhead. The final thing I'll be transparent about is last year, we didn't have any bonuses for our employees. We don't disclose what bonuses we pay our employees. But I'll tell you, in F'24 with a 50% growth in our branded EBITDA, there are quite a number of employees who rightly deserve some bonuses. It's not 0, it's not 100%, it's somewhere in between, and you see some of that in unallocated overheads. On the next slide, you get some key performance measures. And I would step back to our Strategic and Investor Day on November of 2023. And at that time, we said, we look at the next 5 years to that F '28. There are 2 measures that are most important to our strategic plan. The first of those is margins. Gross margin and EBITDA margin, right? So, you see an improvement of 0.4 points in our gross margin. Now we don't disclose gross margins individually for our bulk and branded business. But if you recognize that our bulk business declined by $60 million plus in earnings, what you're getting is a huge improvement in our brand and gross margin for the whole group to move forward. So, that's really encouraging. I'm going to pause for a second on dividends for shares Barry said, a good 7% improvement in dividends per share. And I think what's exciting as you look to the next 3 or 4 years, as you'll see in our annual report that we have a bank of franking credits of over $113 million. So as our EPS expands in the coming years, as it will, the opportunity to reward shareholders with fully franked dividends is very strong, very compelling. So that's great. The final thing at the bottom is return on funds employed. We've moved up almost 2 points to 5.6%, not nearly good enough. Our Strat plan demands that we get to over 10%, and we will buy 2. We need to be in that double-digits. But that's a great move forward. That was driven by network and capital reduction. That was driven by being choiceful about CapEx. And as Pete said, us selling some assets that maybe belong better than others had, whether that's the Canberra site or the Leeton primary processing site. So, a lot of work went into driving that growth forward, and we're very pleased with that result. The next page is the segments, and we've covered most of the numbers on this page. I think the only thing I'll point out is as part of that strategic plan day, if we've delivered $200 million in normalized EBITDA in our branded business, what we said by FY '28, we want to be at $250 million, that only requires us to grow 6% a year CAGR in our branded business. So, not an unreasonable target, right? And it allows us to step up investments in our brands and to really do that in a sustainable way. So, there's a clear pathway to our strategic plan, and we remain firmly on that pathway. The final couple of slides. The next one is titled cash flow, and I would say this was a real highlight of the year. And if you look at the operating activities cash flow line in the middle of that, you see us almost breakeven last year in FY '23, and we've got up to $134 million of operating cash flow in FY '24. Very pleased with that. That's already over 80% cash conversion. And if you look in that top section of the cash flow, it's an income tax year where we had several million of additional income tax costs to form a consolidated tax group, and we're at the peak of the financing costs. If you normalize for those things, we're in the range of 90% to 100% cash conversion. So, a very strong set of numbers, largely driven by working capital. Our working capital came down $74 million, and that was predominantly driving down inventories, particularly in our bulk business. Now lower down, you see investments in new PP&E in intangibles. That's our CapEx line. That was $74.6 million. So, I want to leave you with one thought on this slide. We funded our entire capital expenditure investment program with a reduction in net working capital. That's a great message. The final slide on the next slide is our balance sheet. Our receivables were up a bit. We did sell more in May and June of the year, leading to higher receivables. But there you see inventory dropping $70 million year-over-year. So really strong performance there. And I just want to call out the payables line. Our journey on payables is going to be a 3 or 4-year journey with smaller suppliers and farmers, we pay them quickly, and we pay them on time. But for medium to large suppliers, we need them to bear a fair proportion of the industry supply chain with us. So, they need to be at 60-plus days. As large suppliers come up for renewal, we are discussing payment terms and pushing those until we get to a fair outcome, and that is beginning to make a difference here. So net debt, down over $40 million and $1.3 million leverage. What can you expect to see from us in F '25? We always do have a net investment in that first half of the year. Remember, in Spring Peak, we get 60% to 65% of our milk in that first half. In December of 2023, we had a 1.9% leverage. We're going to improve on that and we'll probably deliver between 1.6 and 1.8 leverage. So, it will improve. By the end of FY '25, we will improve on the 1.3x, and we'll get somewhere between 1x and 1.2x leverage or better. So, very exciting is once you get to 1.0x, you're really talking about what kind of capital management can we do to really reward our shareholders. So that's for me, I'm going to hand back to Pete, who is going to summarize where we are today and where we're going in the future.

Terrific. Thank you very much. So, if we just move on to the slide, which obviously heading where we are today. So, I think we're really well placed. And that's been a strategy that's been in place for some time now, but as we've been transitioning towards a branded business. We have iconic brands that resonate with consumers in Australia and internationally. They're in place and have the ability to move with consumer desires and insights, particularly we had functional benefits around healthy eating and around snacking and across a number of different day parts. So, I think we're in a really good place with our -- connect leading brands. We've got an integrated manufacturing and processing network that is starting to operate well, but I think still has more improvement in it, and we'll be working on that over the next 12 months with our strategic review of PCA, but we're starting to get good benefits in that network. I think it's starting to sort of get to a place where we can really springboard off that. We'll continue to invest more in technology around our logistics and around our Bega route network system. And so, I just think that there's a lot of opportunity for productivity improvements within the business. I'm really happy with our agile response to the Chinese in the market. As I said, we've seen consumers trading and out of channels and within category subsets. But I think we've got the ability to move with those different changes, they don't always suit you. But we have got good representation across a number of channels that allow us to defend against that. And as they continue to evolve. So as consumer center and confidence come back, I think we're well positioned to win in areas that are probably doing a bit tough at the moment. Our branded acquisitions are ahead of business case. So, both the Mondelez and the BDD acquisitions are ahead of us, which has been terrific because our bulk business has -- as Barry has alluded to and stated, has been under a lot of stress over the last 3 years. So, without those businesses performing in the way they have, our results would have been a lot tougher. I think there's still huge opportunity though. I think we can continue to grow our brands, both here and overseas. As I said, I've talked about the excitement that we've got with the opportunities in our branded space overseeing. Southeast Asia and the Middle East, which are growing areas as they transition into higher-protein diets and seek more dairy on a daily basis. So, I think great opportunities there. I also like how we can extend our core brands here without necessarily having to go too far from the brand essence or what they mean. So, we continue to see great runway for dairy and in the beverage space and for our entire branded brands into consumer needs. We think that we've got our bulk business in a good place. So, nothing like facing the headwinds that we can to face into over the last couple of years. And we think it will start to pick up on the opportunities as we continue to see that gap between doing oil prices and embolic narrow a little bit, and we're seeing a little bit more rationalization. I saw rational sort of bidding in the milk procurement season this year. We think that, that will probably continue. But we think our bulk business is going to be really well placed to do that. We'll continue to invest in cream cheese, milk protein concentrate powders in later, and in nondairy proteins, where we can continue to make that business more resilient. And we're happy about our balance sheet strength. And Gunther and the team have done a huge amount of work on that. And it's worth noting that that's also been done in an environment where our inventory levels actually risen dramatically because of the cost of that has been a head hit to our working capital and the team have done a great job on that. And we think that we've got our people and capability is in a really good place. So obviously, we took costs out. We'll continue to take cost out as we spend on our technology and we look to automate and do things better. But we think we've got the right people driving those strategic, and we're excited about their ability to take it forward.  So, looking into next year, we think we can -- as Gunther alluded to, we think we can continue to drive good outcomes for our shareholders through our returns on funds in food and the earnings per share accretion that goes with that. We think that our strategy stands up, and we think that there's some really good work we can do against our strategic pillars that will continue to improve those results. It will be a slightly different year. So, we're seeing a very challenged consumer environment. We accept that we were able to get some mitigation from high costs through price increases in FY '24. Although as I said, we showed a good track record of value creation. We think that, that will not be in place in FY '25. Therefore, earnings will have to be driven through productivity and efficiency improvements. In fact, we've forecast very little price increase for the FY '25 year. It will be done by improving our footprint, driving growth through volume while being competitive on price, selective promotional campaigns, and operational leverage. So, that's what we think will drive our way for 25 years. We think our branded business can continue to grow through those opportunities, but it will be sort of single mid-digit growth, and our bulk business will respond to that closing down of the gap between cost commodity price.  We still will not get back to its original levels in the short-term because we do see commodity prices being reasonably constrained. But we've planned for that, and that's in our numbers. So, we are calling out a group normalized EBITDA range of $190 million to $200 million. And we think that's in line with where we want to go around our 2028 strategy to hit $250 million earnings run rate and continue to improve our returns on funds employed. So, with that, I'd just like to thank the team or their outstanding work throughout the year. As I said, we've had some things go against us, but that hasn't stopped them from working really hard areas where we can make an improvement. And therefore, we've been pleased with the ability to improve our earnings profile year-on-year in light of those challenges. And so, I'd just like to thank all the team for their support and thank our shareholders for their support during that time. And I'll now throw it back to Barry.

Thank you, Pete. Thank you, Gunther. I think before we get to questions, I think I'd just comment that what we look to present to you today is not only a comprehensive overview of the business, but also a reaffirmation that we have remained focused on strategy. And despite the fact that over the last 2 or 3 years, we've certainly had a number of headwinds. I think one of the things I'm most proud of is we put a team together that will definitely take us forward. We've got a great team and you can hear by Pete and Gunther's presentation. And indeed, if we went deeper into our executive team, particularly around that transition to branding. We've built genuine capability in brands that perhaps wasn't here 3 to 4 years ago. We've retained our knowledge and understanding of bulk. So, we present to you a very strong leadership group that can execute on strategy very capably.  And I think Pete's comment that we remain fundamentally confident with the strategy that we set a number of years ago. And I think this result demonstrates a very good path to it, particularly in light of the outlook that we're presenting here for the coming year. So that said, I'm very happy to open up for questions.

[Operator Instructions]. Your first question today comes from David Errington at Bank of America.

Barry, Gunther, I really enjoyed your presentation. But if I could identify or if you could look at Slide 27. I'm giving a lot of feedback. I don't know if you guys are getting that as well, but I'm getting a lot of feedback on the line. On Slide 27, that bridge of earnings where you've got -- you branded volume of 112 growth, then your branded cost efficiencies or your branded cost inflation of $84 million, and then your $43 million of value creation. Knowing the retailers that I know them pretty well, I've covered them for a long time, what they like to see, they like to see your efficiency gains offsetting your cost increases. And what you've done a wonderful job at is being able to secure that branded volume, mix, and price improvements that's been way over the cost minus the efficiencies. What my concern is going forward, is when the retailers see this and then when I hear Gunther talking about 60% EPS growth, my concern is that they're going to come after you with a lot more aggressive promotional activity required. They're probably going to see pricing -- better pricing, more aggressive pricing. So what mechanisms, I mean, you spoke about it in your summary there, you spoke about that you're going to have a tougher consumer this year. What mechanisms other than innovation do you have to preserve, if you like, that wonderful achievement that you achieved? And can you go into that with winning on the street? Because I think we're winning on the street is going to be critical going forward for the next 2 or 3 years in being able to preserve your profitability, because if you're just relying upon the major retailers, I think that that profit could be at risk. So, could you give us a bit of comment on that? Because I'm really interested to hear your views on that because whilst that's a wonderful achievement, that's Slide 27. I mean it's all power to you. Congratulations. It is also a threat given that your reliance on the retailer at the moment and your lack is on the street. So, I think you know where I'm going there. I see that more as a threat as I do as an opportunity.

Yes. Absolutely, David, and it's something that we're conversing of. So, I think the gap that we've got there is really a restoration after that significant cost increase. So, I would anticipate that costs won't continue to run at that level the cost of 4% or 5%. So, we think that the cost -- we think that $84 million number will probably come back to a more normalized level. And in that situation, you're absolutely right. Your value creation initiatives were to cancel your costs. So that I think is a more -- I think there will be a more normalized profile moving forward, but I absolutely concur of what you're saying. So, if I just think of it from 2 ways. So, I'll just -- the first piece, I'll just stick with the large retailers for the minute and then I'll move on to the win on the street piece, which I agree with you is super important. And that's why we have put it in as a strategic imperative and why also international brands is in there as well. So, I completely concur. So, we think that with promotional activity and even in the first couple of months this year, we've really tried to lean into that. So, where we've got operational leverage and we can actually reduce cost by driving volume through aggressive promotional activity, we will and we've done some campaigns around Dairy Farmers Yogurt which has been particularly successful. Being in Melbourne and Sydney, you'll see that Pure and Dairy Farmers like milk has come down to 35%, which we're getting very good uplifts and cost per unit benefits back into those sites because they really -- they like an uplift in volume. So, we'll use that volume lever, super-promotional lever, and mix to try and alleviate and work with our big retail partners. And we're always talking about how we get a more cost-effective outcome for consumers and stay relevant. So, I think that if you get on the front foot and work with them and set up a promotional campaign that drives benefits to them for us is the consumer. That's sort of the way we'd like to alleviate that and keep driving our cost footprint down. So, we look at optimizing our sites, optimizing our distribution centers. So, I think that's just an ongoing piece. I think we've still got a fair -- we've done a good job, I think, we can continue to get better at. So, that's that piece. With on the street, it is absolutely a growth area for us. Now we're on the street has been -- it's had some headwinds. That's why I'm so pleased with the growth in food service. So, petrol convenience is down about 5% to 6%. And we're seeing merchandise purchasing and petrol down significantly. And we're seeing hotels, restaurants, and cafes also doing it pretty tough, and some of the QSR channels are doing pretty tough. So, the fact that we've been able to mitigate a lot of that just by winning market share in the on-street has been absolutely critical. And that provides pretty good margin, particularly if you get your customer baseline, your cost to serve right. And so, we think that that will absolutely be a growth area for us. We have about $850 million of revenue sitting outside that core grocery area. And we think that we will try and drive that sort of close to double digit growth. Part of that, growing at sort of, as I said, 14%, 15%, 16%, 17%, but some of it is telling a bit tough at the moment. We think it's consumer sentiment improves over the next 12 months. So, that absolutely becomes a key ingesting for us. So, $850 million of revenue there versus sort of $1.3 billion of revenue in the core grocery piece. So, there is still -- there's enough scale there to grow that part of that business well. And then the international branded piece, as I said, we want to double that over the next sort of 4, 5 years. We're just looking at some 15% to 20% annualized growth rate. And we think that, that also takes pressure off that core grocery part of our business. So does that sort of?

Yes, it does. It does, absolutely. So, in summary to what you're saying going forward, what we can expect is your channel mix will improve on the street international. So, it won't be as big a contribution. But hopefully, this is the branded volume mix. It will still be a positive contribution. But then you're hopeful that the branded costs will come back, but your branded efficiency will offset that. So, it will be still hopefully incremental positive growth, but it will be a lot different slide than what you presented this year. I'm assuming that's basically what you're saying in summary?

Yes. And David, I'd add one thing. If you go back 1 year to the slide that we put in last year, we had $300 million of costs and only $250 million of price and our earnings came down. So, it's really important to understand that this is not some wild pricing, and this is a restoration of where we were a couple of years ago. And if you see in both slides together, it's a great way to look at it.

Yes. Terrific slides. And well, it shows this year. Well done on executing, Pete and Gunther. Well done on a great outcome because that slide is -- you don't see that slide very often for a producer selling into the retail channel.

Your next question comes from Josh Kannourakis at Barrenjoey.

Could you give us a little bit more context and apologies if you've done it already, just around branded and bulk in terms of for branded like a bit more context around price volume margin, similar with bulk and the overheads in terms of just the composition of sort of components that you think could break up and the upside and downside sort of risk to each of those?

Yes. And I think, as Pete mentioned, Josh, good to hear from you. We're expecting sort of mid-single-digit growth in our brand business. So, we had $200 million of EBITDA this year, mid-single digits kind of puts you around 210 or a little higher, right? So, it's not massive growth. And within that, pricing may only be 1% or less in F '25. And so, we're planning on a year where we know that pricing is difficult. We're not attempting to take huge amounts of pricing. And in some categories, we are adding frequency and promotions to make sure that we're representing great value to our consumers. We're seeing consumers move into larger format hubs of yogurt, for example. So, we're planning for a world where there's not going to be a lot of prices next year. And as Pete said, the most important thing in that is you drive mix into higher profitability categories where you can and you have really great efficiency programs. So, efficiency is going to be paramount. So mid-single-digit growth on that branded business. What's exciting is the bulk business returning to profitability and when we got together with you and others, Josh, in Investor Day, a lot of people asked us as we were losing money in F '24 on the bulk business. Should you sell that, should you get out of it? I think F '25 is going to demonstrate very clearly why we're committed to that bulk business, and we're very confident that you see that return to profitability. Whether that's $10 million, $15 million or $20 million of profitability, we won't give any guidance on the breakdown at this point, but we're very confident that it returns to profitability and the gap between Farmgate and global dairy commodities is certainly a lot less than the year that's just finished. Does that help?

Yes. That's very helpful. So, I guess, as we're sitting there today, as you guys look down, because obviously, it's still very early on in the year. Is that sort of the bulk side of things, is that still where you see the key source of upside, obviously, from a commodity perspective. And obviously, just keen to understand where you see sort of some of the upside, downside risks across the portfolio?

Yes, Josh, it's Barry here. So really, what we're seeing is it's been a really good performance in branded this year, which to reemphasize what Gunther was saying, really a restoration of where we do expect branded to be after the challenging year of those major cost increases in the previous year. And we expect that to be stable with some small improvements, some opportunity, but the big turnaround will be in bulk were obviously very big hit this year. We've made some adjustments. We've -- I think make some greater efficiencies, but that key thing is that alignment of Farmgate milk price, which is very well shown on the slide, demonstrating commodity milk value and Farmgate milk price, that's the key turnaround. That will be the big addition to why we feel so confident about the forecast next year. And of course, we are through milk procurement season. So, we do have a number of notices there. We have been in global dairy commodity selling for a great period of time. So, we understand about the supply and demand fairly well. And of course, we've now procured the milk that we require, and we understand our price. So, there's a certainty around where we think bulk should land.

And then just final one, just around, maybe Gunther on the D&A interest sort of profile. I know you started on that, and I do apologize if I missed it a little bit earlier, but just to give us the frame into both '25 on those characteristics, but then as we think in context, as you mentioned, around that heading out to the $250 million of EBITDA, just what that starts to look like over the next few periods?

Yes, absolutely. I think, Josh, one of the things I mentioned is that we'll continue to spend and invest in CapEx at a level that's slightly below depreciation. So, we're sort of saying $70 million, $75 million, maybe some years $80 million. So, the point is it's below the $88 million depreciation. So, what you can expect to see over the next 3 or 4 years is a gentle downward curve in depreciation. It might be $1 million or $2 a year. And you might say why isn't it more than that Gunther? The only thing I'd say is because we're investing 15% to 25% of our CapEx in IT, IT investments tend to have a life of 5 years, whereas production equipment can be 10 to 15 years. And so, investment below D&A with a slightly different mix of investment to enable technology, but that will allow depreciation and amortization to drop $1 million to $2 million per year over the next few years.

Great. And sorry, just on the interest profile as well with respect to the total interest, equity leases and stuff.

Yes. And I think that will start to move slowly downwards. And there's a lot of great debate out there, Josh, about what interest rates are going to do. We've heard hire for a little longer in Australia. Our view is in the next 12 months. So, you're going to start to see rates decline. And so maybe it's April next year, it depends which bank you listen to. I think the more important thing in our interest profile is what we do on our balance sheet. And so, ignoring rate movements, we are confident that we continue to become more cash generative and more cash efficient, and that is what will drive interest rates down. So, maybe in F '25, you're just going to see them move down $2 million or $3 million. But as we continue to get more cash efficient, obviously, our interest costs will continue to fall. So, I would model on average, a couple of million dollars decrease in finance costs a year through F '28, at least.

Your next question comes from Phillip Kimber at E&P Capital.

Can I ask just one clarification question, and then one question on capital management. For clarification, just on Slide 27, which I agree is a great slide. I thought Gunther said that $84 million step-up in branded costs represented at about 3.5% inflation. I don't know if I heard that right?

Yes. That's about right, Phil. Yes. And I'm just looking at the branded cost base and, of course, excluding the bulk cost base, yes. So, it's about 3%, 3.5% yes.

Okay. So, that's the sort of magnitude that we might see again in FY '25.

I think that I would say that inflation is beginning to slow. And so, I would expect slightly less inflation. So, for example, energy and gas, while they might still go up in F '25, they won't go up as much as they did in F '24. And there's signs that by the second half, they may start to turn the corner as an example. We're starting to see some other commodities like sugar beginning to turn as well. So even if you exclude milk, which is going down, the cost base, excluding milk, should have less inflation than it did in F '24, which is positive, with the exception of labor. You've got EVA agreements. So, we need to have value creation and savings projects to offset labor. But in other spend areas, we're starting to see that inflation is slowing a bit in a few of them.

Okay. And then the cost savings that you showed there of $43.1 million, I mean, do they accelerate from here? Or is that a good way to think about efficiency projects in FY '25?

I think it's a good way. That sort of $40 million kind of number. We're trying to target that in our logistics, procurement and manufacturing network, we need to have sort of $30 million to $40 million every year in those networks. And so, I would continue to model that kind of number going around 40% going forward.

Great. And then my last question was just you talked -- I mean, the debt position was fantastic. And you talked about once you get under 1 tonne, you can think about capital management? I mean, historically, the firm has probably been more centered on acquisitions than returning capital. So, maybe it's a question for Barry. Just wanted to understand the thinking around that when those debt levels to get down towards those sorts of ranges that Gunther talked about?

Phil, I think we would obviously see that the balance sheet strength of an opportunity to open up all options. And I think we would absolutely say that whenever we've thought about acquisition, it's because it is absolutely aligned with the strategy that we want to execute. And that will always be the case, obviously, as we look for opportunities to improve the performance of this business. But where we don't see that opportunity, we obviously have the opportunity to further reward shareholders or make other decisions around capital. But I think for us, my first rule of thumb, almost all go after we've made acquisition is to get that balance sheet back as strong as possible, as quickly as possible. And then once that is done, that opens up the opportunity for us and that option can be obviously to further reward shareholders or it can be to further strengthen the business in terms of the strategy.

Your next question comes from Evan Karatzas at UBS.

Just 2 for me. Firstly, so you're saying that commodity prices remain in line with FY '24. Barry, you also talked about how you sort of have a good feel for what the cost base for bulk will be. Can you just give an idea of what the benefit from the 100-or-so sent drop in Farmgate prices we should expect for FY '25, please?

Yes. And I think one of the -- Evan, great to hear from you, one of the of rules of thumb we discussed with people is for every $0.10 drop in farm gate milk prices sort of in that $3.5 million to $4 million kind of EBITDA benefit. So, we'll get over $30 million of asset as Farmgate realigned closer to commodities. I think the important thing for people to realize, though, is that the majority of that, some more than 3/4 of that will go to the bulk business. Because what happens in the branded business, you get states like Queensland and New South Wales, they are often multiyear contracts that we have with farmers. The milk price hasn't changed very much in those states. So, the branded milk cost is not moving a huge amount. It will go down a few million dollars, but not a ton, right? Most of the benefit in milk prices occurs in Victoria, where it's commodity milk and a seasonal milk. And so, of that $30-some million that you get from milk price benefit, that's why you'll see most of that accruing to the bulk business. So, where we lost $18 million this year, well, if you add the better part of $30 million, $35 million to that number, that's where you start getting 10 million -- and you get $10 million, $15 million, $20 million profit in your bulk business, that's what you'd be hoping for. That's why we're confident in the return to profitability of our bulk business.

So, around that $15 million to $20 million sort of a rough, I don't know number.

$15 million to $20 million, that kind of range, yes.

That's a wide range. Anyway, okay. The inventory reduction as well. Do you want to just maybe talk about that? Is there more to play out there for the bulk business? And did any of it come from branded at all? Or is it all in bulk?

Our branded business has very tight inventory evidence you tend to find because it's a fresh business on the branded side largely. You tend to carry 9, 10, 11, 12 days of stock. And so, there was a little bit of benefit in branded, and it was underpinned by very good integrated planning, right? So, we did have some. The biggest stuff was processed cheese went down considerably. So, we've really aligned our processed cheese and achieved inventories overall to the right inventory level. The team in the bulk business also did a terrific job in a very difficult market climate of selling things like protein powders, skimmed milk powders, and we did produce extra butter this year. They did a great job of selling that as well. So, the big downdraft was butter, skimmed milk powder, and cheese. Those were the 3 things that led the inventory decline. I would say, as you look forward, we will have that net inventory investment in the first half as we always do, and I mentioned that. So, we'll deliver sort of 1.6 to 1.8 leverage at the half year. But by the end of the year, absent any of the great stuff Barry is talking about with M&A, just organically, you would expect our leverage to continue to drop by the end of the year.

Your next question comes from Mark Topy at Select Equities.

First question just on the farmgate, where it is at the moment. And just looking across the ditto the recent moves there with Fonterra. And I suppose the read on the commodity market, global commodity market. I'm just wondering, is there any risk that you see of -- or how do you see the possibility there might be some step-ups across the year, particularly given some of that your unhappiness in the farmers, I suppose, that's sort of venting publicly. But just wondering, how do we read that Frontera move and the last CDT move up 5%?

So, Mark, I think there's always a bit of risk of comparing not procurement market in New Zealand with the procurement market in Australia. And sometimes, quite frankly, those movements are represented in a way that we wouldn't agree with. So, the reality of the Australian market this year. And I think what Gunther and Pete talked about was that when we're talking about a restoring of profitability is a bulk business, it is nothing like the historic profitability of the bulk business over time. A part of that is because we still remain in a highly competitive procurement market. And we would say, as we've gone out to market to procure milk, the milk prices are there at the moment. And we did say this at all our supply menswear walking and talking about it, is that we have action in some of that improvement in that milk price already. So, what we would need to see as far as farmgate milk price movement in Australia was concerned, is an outsizing of what is expected to be overall an improvement in global commodity markets, but not significant improvement. That's different to the way New Zealand looks at where they are basically reflecting those commodity markets in their pay rates, whatever they are, they are reflected. In our case, we are doing a mix of responding to competition, responding to the fact that we've got a heavy domestic dairy industry here that supplies the domestic market. So, it is almost inevitable that what you're seeing in milk procurement in Australia is that the predictable nature of what's going forward in commodity is actually being built in and taken the risk on by the dairy companies procuring milk. The difference is this year that is not just in total misalignment, that has come more into alignment, but still remain competitive. So hence, why we're communicating to our farmers that we would have to see -- small improvements in the market have already been considered and the risk for one of the better way of putting it, has been already taken by the company and understanding those improvements arrive. It's why Gunther gives a bit of a range in terms of those improvements casually not being to stay. But in reality, we have to manage our milk-procurement communication, and we don't actually manage it through the media. We manage it by going out and talking to our farmers and they're well informed about where we sit.

And just in terms of then the cost inputs, and I suppose I'm particularly interested in one that spiked up in terms of the orange juice global concentrate price. Just wondering if you might comment on some of these other cost inputs. And I think cocoa has mentioned as well. But how do you see the impact of that in FY '25 and managing that going forward?

There's been a significant orange shortage globally, which has driven both the price of concentrate up and fresh orange is up. So, that's created a significant increase in cost and also the ability to actually procure fruit. So, we're pretty happy with our fruit procurement, but it's certainly one of the categories that has dropped in volume. We've changed formulation to best mitigate that. And you'll see a fair bit of other juice coming out into the market. So, a lot of the juice manufacturers are transitioning into apple or other variants of juice to mitigate that. But there's no doubt that our orange juice business performed well below historical levels, and that's built into that result that we've had. So, we've managed that. The other thing, the other item that has gone is increased in price quite significantly has been peanuts. That's also managed within the result. But so that year-on-year growth, you've got to manage both pretty serious step-ups in oranges and peanuts. But we don't think we'll -- we think the oranges will probably stay elevated for a couple of years, so that's built into our own rates. We actually think payments will probably come back in the next year or 2. That would be the 2 big movements. Sugar has gone up, and it looks like it's probably come down a bit now and cocoa. We do have exposure to cocoa, not nearly as much exposure as a manufacturer, but cocoa as definitely being elevated. But we've.

So, can we get a sense of how much or the impact? Or can you give us some idea?

Within those numbers, so within that 84 number market going to be certainly more than $10 million, probably closer to $20 million.

Yes. And then on the food service side, I guess, making some good progress here given the size of that market. Can you tell us about your ambitions and obviously, the size of that market and the opportunity going forward? And what's driven your sort of growth over the last 12 months?

Yes, absolutely. So, if I look at the size of that market, there's about sort of close to $850 million across that nongrocery space. We've got a fraction of the market share in that space. So, you're right, it's a very out-of-home consumption in Australia, albeit it's doing a bit tough at the moment is significantly weighted globally towards out-of-home consumption. So, we are a country that likes to out and particularly breakfast, which suit us. So, we're very heavily weighted in breakfast. So, we see a huge opportunity. Most of our business has traditionally been white milk. And so, our challenge is to is to continue to grow white milk, but actually just selling the rest of our range. And believe it or not, because we've got different businesses, we actually weren't selling the range in a targeted way. And we actually didn't have the range set up to be sold altogether. So, part of bringing that branded business together in out was to create a team that was dedicated to this part of the market. So, we're now going and with our new mobile application, we're now able to go to our customers directly with the full range of products and leverage our distribution network to get the full range of the product in. So, we're now stopping at customers where we traditionally just sold white milk, and we're selling in cream. We're selling them cheese, mozzarella, parmesans. We're selling the butter, and we actually picked up our spread sales dramatically in that part of the market over the last 3 or 4 months. So, we're going with a proper offering. It's also designed for them. So, things like cooking cream, which we never used to traditionally do. It's massive in pubs and clubs and past the fishes and carbonara. We're now developing with shares those sorts of products. The product range is improving. It's been completely branded Dare as dairy farmers. We've recruited some terrific executives in particular, we've got it, very strong Simplot experience that we would hold up as one of the exemplars in this part of the -- in this channel. And so, we're just doing a whole new work that, as I said, revenue in food service went up by 14% last year, and we think we'll continue or accelerate that growth forward.

What sort of market share do you think you might in 5-year time, would you?

Yes, market share is hard in this space. But I would say that across most of those areas where we're #1 or #2, in grocery, we would probably be 5 or 6. So, that sort of gives you an idea of the -- and if you think that, that space is sort of around the $800 million-plus market. We think there's a huge opportunity here.

Yes, sure. And lastly, just on the cold chain with sort of presses, economic pressure under. Is it fair to assume that maybe the growth sort of plans there, have been a little bit stony -- can you talk us through, I suppose, as you see consumers bouncing back just how the plans for the cold chain going forward, whether it's plant-based or other products that you can now slot into that cold chain?

Well, that sort of ties to what I was saying before, around extending that range because that range I talked about with food service, a lot of our product goes through traditional wholesalers, and we work really closely with them, and they're very important to us. But some of it goes direct, and that level of profit does go direct actually goes on those trucks. And so, it is actually building out efficiencies within our cold chain. And one of the things really pleased about is that with the new sales team, with the new marketing team that are focused purely on that channel, with the new technology around the new digital ordering platform that we've got. That's actually increasing efficiencies and the optionality to sell that full range to those customers. So, we've got an aspiration. We'd love to go from sort of 5 or 6 to be the #1 or #2 player in that space. Dairy is the second biggest volume category in out-of-home dining. So, we think there's significant room there many times.

Your next question comes from Richard Amland at CLSA.

Just a quick question from me. The annual report says you guys pulled in 1.33 billion liters of milk this year, which is just a touch under the prior year, but I know you guys have spoken about you got some favorable milk procurement in the second half. To what extent is your financial outlook exposure to the milk procurement, how much are you looking for? And what do you see in terms of risk?

So, Richard, as I said, milk procurement is fundamentally done in the month of June. We've largely done that our milk procurement stable. So, we've got the milk acquired and that we went after. In our procurement, we obviously build in all our forecasts. We're building forecast potential closures and of that and some seasonal variance. The opportunity in bulk, it depends on what sort of spring we see because, obviously, whilst we have our direct supply, when that spring plus comes, there are opportunities to purchase milk other companies. That's something that's not essential, but always helpful as we look at that range, the bulk might make. But yes, so we're pretty comfortable with where we are with milk procurement. And I would say just -- and Pete mentioned this earlier, we've actually had quite a dry winter across much of our supply areas which may surprise people, but that generally means that you start with a bit of a stronger milk intake, and we've seen that in the early months of this year, milking take above where we thought it might be. The testing factor will be whether we get rain for the spring. And we've got variation across our supply base about where -- about seasonal conditions, but nothing that's alarming us. But at the moment, we're probably running a little ahead of what we expected, but we're not getting carried away because we just need to see how that spring period looks.

Okay. That's great. And it sounds coincidental. I had a poor connection when Gunther put out his medium-term or mentioned as medium-term branded EBITDA margin target. I thought I heard 10%, but it could have been completely wrong. And I just wanted to double check what that was?

You're talking about F '28 at the end of the Strat plan?

I think that. Yes, yes.

So, I think Pete actually mentioned that we're aspiring to get to sort of that 10% EBITDA margins for F '28 or shortly thereafter. And we want it to be over 10%. Yes.

Unfortunately, that does conclude the question-and-answer session. I would like to now hand back to Barry for closing remarks.

Thank you, everybody, and apologies that we've gone a little over time, but thank you for the questions. And indeed, as I think Pete mentioned, obviously, this result comes together from -- because of a lot of effort in a lot of different areas. And so obviously, I thank the Bega team. It's great for Gunther and I to represent them in this call. But the reality is there's a lot of people that they're working very hard to make sure they deliver on both the strategy and the operational results this year. Also, of course, I thank the shareholders, our dairy farmer suppliers and our other suppliers, and all our other colleagues that have supported us over the previous financial year. And we look forward to continuing to improve next year. So, thank you very much, everybody.

Thank you. That concludes the conference for today. Thank you for participating. You may now disconnect your lines.